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Stanton Company Direct Materials, Labor, and Applied Overhead

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Stanton Company is planning to produce 2,500 units of product in 2012. Each unit requires 1.20 pounds of materials at $7.70 per pound and a half-hour of labor at $12.80 per hour. The overhead rate is 80% of direct labor.

(a) Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead.

Direct materials $

Direct labor $

Overhead $

(b) Compute the standard cost of one unit of product. (Round answer to 2 decimal places, e.g. 2.75.)

Standard cost $

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Solution Summary

This solution gives step-by-step computations to assist with calculating a company's total annual budgeted amounts for direct materials, direct labour and applied overhead, as well as calculating the cost for a single unit of product, taking into account the cost of materials, the amount of materials needed, and the cost of labor. An Excel file with the computations set out in a spreadsheet is also provided.

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(a)

Direct materials:
Cost of 1 unit = 1.2lb/unit * $7.70/lb = $9.24/unit
Cost of 2,500 units = $9.24/unit * 2,500 units = $23,100 <---answer for Direct ...

Solution provided by:
J Pye, MSc
Education
  • MSc, California State Polytechnic University, Pomona
  • MBA, University of California, Riverside
  • BSc, California State Polytechnic University, Pomona
  • BSc, California State Polytechnic University, Pomona
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